Your browser does not support inline frames or is currently configured not to display inline frames.

Some of the Most Useful Financial Measures and Explanations on What
they Really Tell Us About the Stock

Price to
earnings (P/E) ratio: This is one of the most widely used
measures. It tells us the price of the stock relative to the
earnings of the company. In general, a stock with a lower P/E is
seen as 'cheaper' for what you are getting than a stock with a
higher P/E. For large cap stocks, the ratio should be under 25. For
all stocks, it should not exceed 50. A higher P/E normally is
attached to a riskier stock. A stock with no earnings will not have
a P/E ratio.

Price to
sales (P/S) ratio: This is similar to a P/E ratio in that it
is a stock valuation measure. Lower numbers show that the stock
costs less for the amount of sales the company is producing.
Ideally, the P/S should be around 1.

Return on
Equity (ROE): This is calculated by dividing a company's net
income by its common stock equity. Essentially, this is the rate of
return the company earns on the things it owns. The ROE should be
increasing by at least 10 percent.

Debt to
Asset (D/A) ratio: This is a simple calculation of debts
divided by assets. Debt should be less than half compared to assets
in a healthy company.

Beta:
The calculation of this uses regression analysis of past prices and
is too complex to discuss here, but the Beta is basically a measure
of share price volatility. The market exhibits a beta of 1.0 and
thus a stock with a similar beta will follow the market. A stock
with a beta of 2.0 will increase twice as much as a bull market and
decline twice as much as a bear market, all things constant. A stock
with a negative beta exhibits price movement opposite of the market.

Market
Capitalization: The market cap is figured by multiplying the
stock price by the number of outstanding shares. Less than $1
billion is considered a small cap, between that and $5 billion a
midcap, and over $5 billion a large cap.